Do You Need A Business Plan If Your Idea Is New, Untested, or Unproven?

Who Should Read This Article?

Anyone nursing a new (especially untested and unproven) – idea for a business, and/or who is at a loss as to whether or not it will be beneficial to undertake a formal business plan preparation process. The ideas presented in this article are just that – ideas. You are expected — and strongly encouraged – to apply your discretion in assessing their usefulness or relevance to your situation.

“Market research does not work. One cannot do market research on something that does not exist.” – Peter Drucker

Entrepreneurs are often dreamers

They are typically people who start businesses in new areas, that previously did not exist. Their ideas can therefore sometimes be met with resistance especially from people called “experts” who are famous for challenging the practicality or logic (from the expert’s perspectives) of any new, unproven or unusual idea.

Business Plans Versus New/Uncharted Markets

Most of us have heard or read about the importance of going through the motions of preparing business plans before starting a new business. However, what few people take note of is the fact that some of those who have succeeded in business did not have business plans when they started their FIRST businesses – even though, they probably never intended for it to be so.

This is especially true for those entrepreneurs who had to enter an uncharted market i.e. who set out to do what had not been done before. Their new product or service could therefore not be compared with any known standard, since nothing like it existed at the time. If that sounds anything like the kind of business idea you have in mind as a first-time startup, you may have to contend with at least two challenges.

Two Challenges:

1. A business plan might not be as good an instrument to convince your potential investors(banks, venture capitalists etc), as the personal conviction, enthusiasm, charisma and passion you demonstrate for what you want to do! For instance, the “experts” among them, who the rest might look up to for assessment of the viability of your proposed venture, may not reckon with your idea if it is new or unusual. David Sarnoff certainly would have understood this point!

Sarnoff, who invented the radio, had to endure what must have been heart-breaking rejection from those he approached to invest in it’s production. Among other things they could not see THE radio(!) as commercially viable, arguing that no one would pay to have a message sent to no specific recipient!

If only they could see us use that same radio now! 🙂 Sarnoff’s associates could not – at the time – see what he was seeing! And that’s what a first-time startup with a new idea needs to keep in mind. People may not see what you see – at first. That will not mean you are wrong, and they are right – no matter how many they are! If it was so obvious in the first place, you probably would not have been the first to discover it!

2. You might just find that the market is not exactly ready for what you have – even if the idea is quite sound. Again it would be up to you, to “create the demand” for your new product or service idea in the market.

For instance, incredible as it might sound, the telephone that is such an essential requirement for our existence today, was described as having “too many shortcomings to be considered as a means of communication” in a Western Union Internal Memo.The memo concluded that the telephone was of no value to the organisation. But that was way back in 1876! We all know that no business that desires to succeed today will operate without a telephone number.

It’s all about vision. Entrepreneurs are people who apply their creative thinking skills to explore what can be, instead of dwelling on what is, as most others do. That tends to make them see far beyond what people around them can – sometimes causing them problems with others. I believe it was Robert Schuller who said “If you want to be a pace setting thinker, you can expect problems with people – especially those trapped by tradition.” A first-time startup with an unproven business idea is most likely to experience this.

“If fifty million people say a foolish thing, it is still a foolish thing.”
– Anatole France

Two Case Studies

Below is a description of two first-time startups who were so closely driven by their circumstances, that they could find no use for a business plan in starting up what eventually turned out to be successful ground-breaking ventures.

a). Henry Ford’s “Horseless Carriage”

When Henry Ford conceived the idea of a “horseless carriage”, people told him pointedly it would not work. Those capable of providing the money for production of the automobile refused to even consider it a commercial possibility for one moment! A business plan would have done Ford little good back then! So he and his wife put all their savings together and went ahead alone. But think for a minute – AFTER Ford had succeeded with the automobile, how the same people would have reacted if he had offered them a business plan for a similar kind of notion? By then, he would no longer be a first time startup, nor would his idea be new or unproven!

b).The Train Chartering Company

Simon Pielow (Founder, the Train Chartering Company, USA) didn’t use a business plan when he started off. In a report published at Allbusiness.com he admitted that his decision to proceed without a formal plan was probably not a wise one. However, as the report writer rightly observed, Pielow had no choice but to do this because he was breaking new ground, and had nothing to work with in the way of existing competitors, models or market analysis.

Pielow himself added that he believed a business plan becomes critical to starting up a business when you’re in a competitive market in which many people are offering products or services similar to what you intend to offer. He ended the interview on a humorous note by saying that had he chosen to do a formal plan, he would probably have been too scared to go ahead, and as such never have achieved the success he eventually did!(Good one to keep in mind, this).

Crucial Considerations For A First Time Startup With A New Business Idea

Bill Byrne in his book “111 Proven Strategies That Will Change The Way You Do Business Forever” explains that if you have a business idea that may be ahead of it’s time, you might have to consider these issues:

1. Can you time your entry into the marketplace perfectly to ensure success?

2. If not, would it be better for you to start up too early or too late?

You need to give these queries deep thought, and possibly engage a trusted associate with genuine understanding of, and empathy for your unproven business idea, to help you through the process. Byrne’s queries are based on the need for a person with a business idea that is ahead of it’s time to increase her chances of success by tempering the aggressive drive to enter into the market, with realism of the dangers inherent in arriving there too early – or earlier than others.

“Do not fear to be eccentric in opinion, for every opinion now accepted was once eccentric.” — Bertrand Russell

What You Can Do

1. Be Patient and Painstaking:

Take your time to develop and refine your concept or idea to the point you can be certain it will work as you intend to tell your target audience it will. This warning should be particularly instructive if you do not have the capital to :

a. recover quickly and fully enough if anything goes wrong after you enter the market(because you failed to correct any outstanding defects or problems).

b. wait for the market to build up adequate demand for your product or service, to keep you going till you break even or start recording profits.

If you fail to manage this properly, you could suffer fatal setbacks from lack of sustained initial patronage. What could then happen is that others, learning from your mistakes, would polish up your idea and re-present it to the same market, which, by your pioneering efforts have become more receptive, and THEY would have a “profits-fest”!

2. Use Intelligent Niched Marketing:

You will need a well conceived niched marketing campaign, taking advantage of today’s powerful yet highly cost-effective business marketing tools(automated email and website marketing/surveys etc) and strategies, in order to maximise the chances of success while minimising operating expenses.

3. Don’t let experts “confuse” or “scare” you!

Cynthia Kersey(Author of “UNSTOPPABLE: 45 Powerful Stories of Perseverance and Triumph from People Just Like You”), described experts as having an “ego investment” in the very thing that they are considered “expert”. Note that an expert could even be someone who once had to struggle – in the past – to secure marketplace acceptance(for what was then an unproven idea), and is now successful, plus a respected authority in his/her field. The irony is however that such a person may not always maintain an entrepreneurial mode of thinking or could develop what I call an “expert’s mindset”. A good example of this is probably seen in the quote below:

“640K ought to be enough for anybody” – Bill Gates, 1981

4. Draw Courage From Your Convictions!

Each of us probably has a tendency to become an “expert ” in one-way or the other. The best way to guard against falling into this mindset is to always ask “Why not?” when confronted with the possibility, or suggestion, of a new idea or new way of doing things. For the new idea start-up, you will need to keep in mind that others who were told by “experts” that their business ideas had no merit, drew courage from their convictions and forged ahead in the face of great discouragement/rejection, and suffering. In the end, they proved the “experts” wrong and got more people to believe in their dreams.

You can do the same – even if you do not have a business plan. I know this because I passed through the same road in starting up my own business as a Multipreneur in a society where it was frowned on.

Final Word: Note that I have NOT said business plans are unnecessary – only that they may not always be relevant to a startup’s needs, in which case their absence would not be a fatal handicap.